Rick Schwartz recently listed Widgets.com for sale on Ebay. There is a reserve on the auction, which is currently seeing a high bid of $2,025. The auction ends on March 26th. This is a sweet name and should sell for A LOT!
Rick Schwartz Lists Widgets.com on Ebay
Join the ICA Already
Mike Berkens has a great post that I think everyone who has invested in domain names should read. Large corporations have been trying to take our generic domain names for us for some time via UDRP, and the Snowe legislation will make it much, much easier and even less expensive. Just to reiterate the most potentially damaging section of the Snowe legislation in case you might have missed it:
SEC. 3.(b)(1)(A)
“…such domain name is or contains the identical name or brand name of, or is confusingly similar to the name or brand name of a government office, nonprofit organization, business, or other entity;”
In short, this is considerably more broad than the Lanham Act, which targets cybersquatters from owning trademark-related domain names. The bill was presented as a “Anti-Phishing” bill, but you wouldn’t have to be involved in phishing or anything nefarious to have your domain name taken under this provision.
A company can claim that your generic domain name is confusingly similar to their name, and they can ask the Attorney General to go after the domain name owner. The owner can be liable for up to $6,000,000 (yes, SIX MILLION DOLLARS) in damages. The threat of a lawsuit like this will have a severe impact on domain values. Who would spend $10k on a domain name if a larger company can poach it?
As I see it, the Internet Commerce Association is the only group standing up for domain investors. Sure, other large domain companies have much to lose, but we can’t rely on them to lobby for us. Most will lobby for their own purposes. When a large company files a UDRP against a trademark domain name that is making good PPC revenue, do you see the parking company help the owner defend his name so they can continue monetizing it? NO. So why should you rely on large companies to foot the bill?
The funny thing is that domain owners are mostly entrepreneurs trying to start their own business online. They are real go-getters. From the looks of Mike’s post, it seems that most domain owners are sitting on their hands. Why? Please tell me why you aren’t joining the ICA.
This isn’t a fund to pay for Rick’s next floral shirt or another addition to Frank’s palace. THIS IS TO PREVENT THE SNOWE BILL FROM BEING PASSED TO SAVE THE DOMAIN INDUSTRY!
If you have no good reason not to do it, please join the ICA or make a donation – it’s 80% tax deductible. The industry needs everyone to help.
I will also match contributions – up to $1,000. In the comment box, mention Elliot’s Blog, and they will let me know how much I need to send.
Buy a Domain Name and Start a Business
One of the coolest things about owning a domain name is that you can get into just about any type of business your heart desires. Domain ownership breaks down some of the barriers of entry in an industry, and it allows you to jump right in feet first. You don’t necessarily need to sell product or services to be in a particular business, and you can make your own niche in the industry.
Let’s say you always wanted to be a travel agent or restaurant reviewer. You can buy yourself a domain name, easily set up blog software (or have someone do it for you), and start writing. You might not become recognized as the next Frank Bruni or Robert Parker, but you can carve your own niche because you can offer a unique perspective that they can’t. There are thousands of people who are similar to you, so why not reach out to them and share your interests? With a bit of web design and marketing help, you can create a unique site that tells people who you are and why you are pursuing this business. Maybe it won’t grow from anything more than a hobby, but the more you write, the better chance that someone will read it and be interested.
All it takes to do this is a domain name and an interest in a particular business. A friend of mine owns a highly targeted domain name (with an affiliate website), in the same industry my father’s been in for 30+ years. I told my friend that he should attend one of the semi-annual industry trade shows. With the domain name he owns, he will instantly receive respect from the wholesalers and exhibitors, even though they probably haven’t heard of his website. Having a well-targeted domain name tends to do that. People assume that you have a well-funded and respected website when you own a great domain name.
I am not a tax expert and this is far from “real” tax advice, but if you started a French restaurant review blog and generate revenue using Adsense or direct advertising sales, I would imagine you could deduct some of your dinners, as that would probably be considered a business expense. Why not get into a business that you are passionate about? It’s as easy as buying a related domain name and simply uploading blogging software or having a designer create a website that reflects your personality.
Of course you could do much more with a domain name than start a blog. You could build a directory site or e-commerce site with a little more work. By purchasing a domain name, you are buying a piece of land in the business district of your choice, and you can build whatever you would like. Is jewelry your thing? Why not set up shop on Jeweler’s Row on Sansom Street in Philadelphia? Want to work in the stock market? Why not buy a property on Wall Street? With domain ownership, you can virtually open a business anywhere you want!
Social Networking Site Advertising
A lot has been said about social networking sites being huge opportunities for advertisers. There is a captive audience who navigated to a particular website, and they spend countless hours meeting up with friends, sending messages to friends old and new, and building their own online homes. It would seem like a great place for advertisers to get their messages out and attempt to generate interest in their brand or product.
The social networking sites typically have the consumer base, and the advertisers wish to reach these consumers. The problem is converting these users to paying customers, and that might be harder than first imagined. I haven’t heard about or seen a very successful business model that is mutually beneficial for the website, the advertisers and the website’s visitors. I know there are countless people trying to monetize this traffic, but what happens if they can’t? I sure hope someone can identify a successful model integrating social networking and ad spend, because there is a lot of money banking on it.
For me, I am sticking to the “old fashioned” directory type of site. It will evolve with time, but I think there is still a place for it even in 2008 and beyond.
Euros vs. Dollars in Domain Names
If I sold a domain name in June 2001 for $1,000,000, it would have only been worth roughly €1,173,000 Euros. If I sold the same name for $1,000,000 in November of 2002, it would have been worth roughly the same amount in Euros. Today, if I sold a domain name for $1,000,000, it would only yield €637,800 Euros. The name would have to have sold for close to twice the price to equal the same value.
While the value of domain names has risen over the same time period, the appreciation of the domain’s value may lose out to the depreciation of the dollar. When considering whether to accept an offer, it’s important to keep in mind.
Clearly, with the lower valuation of the dollar, domain names are becoming cheaper to buy for European investors, although I haven’t noticed an uptick in European investments. I am not an economist and can’t speculate why, but the declining value of the dollar may make you think twice about turning down a large offer and using those funds in a non-US dollar-driven investment vehicle.
Domain Name Valuation Based on Revenue Multiples
Industry professionals occasionally debate about whether buying based on a pay per click revenue multiple is smart, and on what revenue multiple is appropriate to make a purchase. Naysayers (like myself) will argue that there is much more to a domain name than PPC, so simply using a revenue multiple is short sighted. Many who use revenue multiples argue that it’s one of the easiest and best ways to value a domain name, and it is especially important when buying a group of names or a portfolio.
While I don’t believe names should be bought or sold simply on a PPC revenue multiple, I do believe domain names should be bought based on some sort of revenue multiple. In any major business, marketing spend is typically allocated based on the return that is expected from the investment. Most of the time, the company will use a model to project a return based on expected response, lifetime value, depreciation, attrition…etc, etc. They will input the variables they know from past experience and make an educated guess on variables they don’t know. This gives an annual rate of return and can help place a value on an investment.
Using similar calculations based on my past experience, I come up with a value for a domain name before buying or selling it. I like to use 3-5 years as the amount of time to earn back the initial domain investment, but it varies depending on the domain name and my plans for it. With geographic domain names, I can determine approximately how much revenue I will be able to generate based on advertising sales, and I can justify a purchase price based on that. Had I used PPC multiples, I probably wouldn’t have been able to justify my purchase price.
When doing a calculation such as this, keep in mind the cost to develop and maintain the website, the cost of data and data entry, and the time it will take you to make the sales or the cost of paying someone to make the sales. Just because a domain name can make $100,000 per year as a website doesn’t mean the name is worth $300-500k based on my thinking. Since the cost of building and maintaining a website can be high, and the time considerations can be great, it is important to keep these figures in mind. While this isn’t perfect, it can help determine the value of a domain name to make an offer or a sale.